Federal Reserve Vice Chairman Richard Clarida on Friday said he’s “very happy” with the stance of monetary policy, suggesting the hurdle for more interest rate cuts is high.
Clarida said he was optimistic about the outlook and poked a bit of fun at economists who have been forecasting an economic slowdown.
“How many speculations did we see of a terrible labor market report,” Clarida said in an interview on Bloomberg Television.
Instead, the October employment report and the initial reading of third quarter GDP both surprised on the upside this week.
“That’s a good thing,” Clarida said.
The government reported that the U.S. economy added 128,000 jobs in October, much higher than forecast on Friday. Earlier this week data showed U.S. third quarter-GDP rose at a 1.9% annual rate, beating estimates.
“The economy is very resilient. The consumer has never been in better shape,” Clarida said.
On Wednesday, the Fed cut interest rates by a quarter-point for the third meeting in a row and Fed Chairman Jerome Powell signaled the central bank intends to pause to see how the economy fares in the face of a global slowdown and the U.S.-China ongoing trade war.
Boston Fed President Eric Rosengren, who voted against this week’s rate cut, said that fiscal and monetary policy were already accommodative, suggesting the easing was unnecessary.
But Clarida said the three rate cuts were “appropriate.”
“I would be less optimistic about the economy if we had not made those,” three rate cuts, he added.
Clarida said he expects to see some improvement in interest-sensitive sectors, particularly in orders for durable goods.
The Fed vice chairman had one word of caution, saying that the risks to the outlook remains “somewhat” on the downside.
Clarida said he wasn’t worried about wage inflation.
Dallas Federal Reserve Bank President Robert Kaplan also said on Friday the U.S. central bank now has monetary policy at a “roughly” appropriate setting and should leave interest rates where they are for the time being.
Krishna Guha, head of central bank strategy at Evercore ISI, said the Fed’s message is bullish for investors.
“This raises the tantalizing prospect that investors may be able to have their cake and eat it – benefit from confirmation that the economy is stabilizing not slipping towards recession but keep today’s low rates for an extended period, possibly for years,” Guha said in a note to clients.
The Dow Jones Industrial Average
was up 257 points Friday following the U.S. Labor Department’s employment report.